CDI Quarterly Net Revenues Increased

Churchill Downs Inc. reported net revenues from continuing operations for the first quarter of 2013 increased 7% to $148.1 million from $138.2 million during the same period a year ago, primarily as a result of a 21% gain in the gaming segment.

CDI reported gaming net revenues increased from $59.3 million to $72.1 million during the same period in 2012, reflecting the contribution of Riverwalk Casino Hotel in Mississippi which was acquired in October of last year.

Racing operations net revenues declined 8% to $27.8 million from $30.2 million in 2012, primarily due to Arlington Park receiving 18 fewer host days than during the same period of 2012. Online business net revenues decreased 3% to $42.9 million from $44.0 million, reflecting a 2.6% decline in pari-mutuel handle compared to the first quarter of 2012.

"While we set revenue and EBITDA records for the first quarter, our gaming revenues were below our expectations, primarily due to the higher payroll taxes that became effective Jan. 1, and delays in issuing federal and state income tax refunds," Robert L. Evans, chairman and CEO said in a release. "In addition, our online business revenues underperformed due to our decision to stop taking TwinSpires.com wagers in Illinois effective Jan. 18, as the bill authorizing such wagering was allowed to expire by the state legislature."

Evans said "pre-event metrics" for the week of the Kentucky Derby Presented by Yum! Brands (gr. I) and Kentucky Oaks (gr. I) are strong and that a racing and gaming project in which CDI is involved in Ohio is ahead of schedule and below budget.

Evans told investors in an April 25 conference call that because of high-end seating, like the new, sold-out Mansion area, ticket revenues are on pace to be up. He noted, however, that the Derby walk-up crowd is often at the mercy of the weather. Evans also said sponsorship was up and that a major announcement would be made in that area sometime in the next ten days.

"Our joint venture with Delaware North Companies Gaming & Entertainment to build a racing and gaming property north of Cincinnati is progressing ahead of schedule and below budget," Evans said. "And, we are working our way through the licensing process in Maine that we hope will enable us to close on our announced Oxford Casino acquisition in Oxford, Maine, later this year."

In the first quarter Churchill's online gaming business was flat compared to the same period of the previous year. The expiration of legislation that allows Illinois residents to wager online casued the decline, offsetting improvements from continued organic customer growth at TwinSpires.com.

Churchill chief financial officer Bill Mudd said the loss of Illinois customers caused the handle decrease. When Illinois was not considered, handle at TwinSpires.com was up 4.5%. Churchill president Bill Carstanjen said legislation allowing advance-deposit wagering in the state expired in January and the company is working to get the law renewed or pass new ADW legislation.

"It's not a controversial subject; there's no opposition," Carstanjen said in an April 25 conference call with investors. "It just got caught up in broader Illinois politics."

Evans said the CDI board, meeting at Arlington earlier this week, approved a five-year amendment to its bank revolving account. It increases the loan commitment from $375 million to $500 million and provides for additional capacity of up to an additional $225 million.

"This amendment, which is subject to state regulatory approval, provides additional financing capacity, reduces the costs of that funding, and provides greater flexibility in our future capital structure," Evans said.

The board also authorized the repurchase of up to $100 million in CDI stock through the end of 2015.

"This provides a tax-effective way to return capital to shareholders and to offset some of the dilutive effect of equity used in the company's compensation plans," Evans said.